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Every year, AppDirect co-CEO Daniel Saks welcomes MBA students to the company’s headquarters in San Francisco where they discuss business ideas while staring out the window at soaring views of Alcatraz Island, the Golden Gate Bridge and more. It’s the kind of setting that can inspire someone to dream big.
In past years, students have focused their attention on ideas for disrupting the world of enterprise software. But not in 2016. This year, the majority of visiting students narrowed their attention to vertical market opportunities and niche ideas for specific market segments. The reason for the change in focus? A sign of the times, says Saks, who co-founded AppDirect along with Nicolas Desmarais in 2009.
“The obvious ideas have been taken and the market is moving into a new phase,” says the 31-year old entrepreneur. Like many, Saks says the SaaS software market is maturing. This includes not only where developers focus their energies but also how they plan to sell their services.
While the bulk of SaaS and other cloud services sold today are done directly to customers over the Web, it is expected that business partners will take the lead in a mere few years. This includes taking charge of prospecting, converting, onboarding and supporting customers. To date, the precise economics that will support this change have not been fully sorted out. But the business case has, say Saks and others.
“Neither developers nor customers are getting the satisfaction they want,” he told me while staring out the windows of his San Francisco conference room to the Bay below. Take software developers, for example. Many are spending between 100-120 percent of revenue on direct sales—an unsustainable business model by any measure. Despite the promise of click-to-purchase simplicity, SaaS developers are finding it more expense than originally envisioned to market their services, close sales prospects and provide a satisfying customer experience. As a proof point, Saks says his company’s own research found that 90 percent of first-time cloud application buyers required live assistance to complete their selection and purchase. That’s something few SaaS companies budgeted for.
Similarly, customers are also struggling to get the most from their SaaS investments. In particular, many are finding it unwieldy to manage all of the SaaS apps that their business managers have approved. Today, the typical mid-sized enterprise is managing several dozen SaaS purchases. And this is expected to increase by 50 percent or more within three years, according to AppDirect. What makes managing SaaS across an enterprise so difficult is that SaaS applications often come with different pricing models, usage terms, renewal rates and more. Because of this, SaaS adoption has created numerous security, budgeting, compliance and support headaches for IT managers. No wonder that 45 percent of SMB customers have wound up paying for technical support in the past year, according to Parks Associates, or that 56 percent of SaaS customers says they would now prefer to buy SaaS innovations from a single technology provider, according to AppDirect.
What the market needs, Saks says, is a healthy ecosystem of partners that can more cost effectively help both developers and customers alike get the most out of SaaS. This, of course, is where AppDirect comes in. It has built a software platform upon which that ecosystem can thrive, Saks says. The platform includes components for selling core products and services (AppBilling), value added services (AppMarket), building and managing channels (AppReseller), connecting with multiple devices (AppDevices) and providing technical support (AppHelp).
To better understand how the AppDirect platform is helping to give rise to a new cloud partner ecosystem, The VAR Guy went to San Francisco in late September to attend and participate in the 4th Annual AppDirect ENGAGE partner event. In the shadow of the AppDirect corporate office in San Francisco’s financial district, I mixed with more than 370 attendees representing 120 software vendors, cloud service providers, distributors, analysts, investors and more. Attendees from as far away as Germany, Italy, Australia and Japan were on hand to get the latest on the company’s rapid developments. In addition to announcing upgrades and integration improvements to the core AppDirect platform, the company also made two notable announcements. They were:
- An agreement with SoftBank Commerce and Service (C&S) Corp. to leverage the AppDirect platform to distribute cloud services from Microsoft and others through SoftBank’s network of more than 10,000 resellers, and
- A deal with Vodafone to leverage the revamped platform to enable cloud service sales and distribution to Vodafone’s business customers in Italy
At ENGAGE, I turned to Gartner cloud computing analyst Mike Dorosh for his thoughts. He says without hesitation that the technology brought to fore by AppDirect and others is helping to drive cloud sales significantly. IaaS sales, he noted, are expected to grow at a 32 percent Compound Annual Growth Rate (CARG) through 2019. SaaS sales, he adds, are expected to jump 18 percent through then.
“Without AppDirect, this type of growth in the cloud market would not be possible,” Dorosh says.
Here’re some numbers that offer some perspective: To date, AppDirect has integrated more than 350 apps into its partner ecosystem and completed more than 600 distribution deals. In the last year alone, it has added 72 new apps to its portfolio.
As of September, the fast-growing company has opened offices in 12 countries, increased its headcount to 550 and lifted its customer base to more than 33 million. Its stated goal is to build a single platform that can support the digital revolution including the sale of all cloud services (including SaaS, IaaS and virtually anything else as a services) through all channels (online, via call centers, through resellers, etc.) to all business segments (small, medium and enterprise).
Today, AppDirect is essentially a white label platform that can be used by any company looking to sell anything online—from software to infrastructure to fixed goods. The solutions already in use span industries. At AppDirect ENGAGE, the company showcased examples from SoftBank to car maker Jaguar Land Rover.
Does AppDirect have what it takes to kick the SaaS channel into overdrive? Microsoft, Google and other tech giants think so. John Foong, Google’s global director of scaled partnerships addressed the audience at ENGAGE and said the market is ripe for a new channel that can take SaaS sales to a new level. “Even people comfortable buying online need a human touch to sign the bottom line to go from 10 users to 1,000 licenses,” Foong says.
Which is why he and so many others are getting behind AppDirect and companies like it.